Securities Law & Instruments


Headnote

Investment by mutual funds in securities of another mutual fund that is under commonmanagement for specified purpose exempted from the requirement of section 101,clause 111(2)(b), and subsection 111(3), clauses 117(1)(a) and 117(1)(d) subject tocertain specified conditions under which an "active" investment structure may be used.

Statutes Cited

Securities Act (Ontario), R.S.O. 1990 c.S.5, as am. ss. 101, 104(2)(c), 111(2)(b),111(3), 113, 117(1)(a), 117(1)(d), 117(2)

IN THE MATTER OF
THE CANADIAN SECURITIES LEGISLATION OF BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,MANITOBA, ONTARIO, QUEBEC, NOVA SCOTIA AND NEWFOUNDLAND

AND

IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM

AND

IN THE MATTER OF
GLOBAL STRATEGY FINANCIAL INC., GLOBAL STRATEGY WORLD COMPANIES RSP FUNDGLOBAL STRATEGY WORLD BALANCED RSP FUND

MRRS DECISION DOCUMENT


WHEREAS the Canadian securities regulatory authority or regulator (the "DecisionMaker") in each of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec,Nova Scotia and Newfoundland (the "Jurisdictions") has received an application fromGlobal Strategy Financial Inc. ("Global Strategy") as manager and trustee of GlobalStrategy World Companies RSP Fund and Global Strategy World Balanced RSP Fund(individually, an "RSP Fund" and collectively, the "RSP Funds") and Global Strategy WorldCompanies Fund and Global Strategy World Balanced Fund (individually, an "UnderlyingFund" and collectively, the "Underlying Funds") for a decision pursuant to the securitieslegislation of the Jurisdictions (the "Legislation") that:

1. the requirements contained in the Legislation requiring the mutual fund securityholder to issue a news release and file a report where its aggregate holdings ofsecurities of a reporting issuer exceed 10% of the outstanding securities of thereporting issuer and refrain from purchasing additional securities of the reportingissuer for a specified period of time once its holdings exceed this 10% level, andbefore such holdings exceed the 20% level, shall not apply in respect ofinvestments to be made by the RSP Funds in their corresponding UnderlyingFunds;

2. the restrictions contained in the Legislation prohibiting a mutual fund fromknowingly making and holding an investment in a person or company in which themutual fund, alone or together with one or more related mutual funds, is asubstantial security holder shall not apply in respect of investments to be made bythe RSP Funds in their corresponding Underlying Funds; and

3. the requirements contained in the Legislation requiring the management companyto file a report relating to a purchase or sale of securities between the mutual fundand any related person or company or any transaction in which, by arrangementother than an arrangement relating to insider trading in portfolio securities, themutual fund is a joint participant with one or more of its related persons orcompanies, shall not apply in respect of investments to be made by the RSP Fundsin their corresponding Underlying Funds.

The Legislation outlined above in paragraphs 1 through 3 will be referred to in thisDecision Document as the "Applicable Legislation".

AND WHEREAS pursuant to the Mutual Reliance Review System for ExemptiveRelief Applications (the "System") the Ontario Securities Commission is the principalregulator for this application;

AND WHEREAS Global Strategy have represented to the Decision Makers that:

1. Each of the RSP Funds and the Underlying Funds is an open-ended mutual fundtrust established under the laws of the Province of Ontario. Global Strategy is acorporation amalgamated under the laws of Ontario and is the manager, trustee andpromoter of each of the RSP Funds and the Underlying Funds. The registeredoffice of Global Strategy is located in the Province of Ontario.

2. The RSP Funds will be, and the Underlying Funds are, reporting issuers and theUnderlying Funds are not in default of any requirements of the acts or rulesapplicable in each of the provinces and territories of the various securitiesauthorities of Canada. The securities of each of the Underlying Funds are currentlyqualified for distribution pursuant to a simplified prospectus and annual informationform dated December 29, 1998 and the securities of the RSP Funds will bequalified under a simplified prospectus and annual information form to be filedshortly in all provinces and territories.

3. Each of the RSP Funds seeks to achieve its investment objective while ensuringthat securities of the RSP Fund do not constitute "foreign property" for RegisteredPlans (as defined below).

4. To achieve its investment objectives, each of the RSP Funds invests its assets insecurities such that its units will, in the opinion of tax counsel to the RSP Funds, be"qualified investments" for registered retirement savings plans, registered retirementincome funds and deferred profit sharing plans (the "Registered Plans") under theIncome Tax Act (Canada) (the "Tax Act") and will not constitute foreign property ina Registered Plan. This will primarily be achieved through the implementation ofa derivative strategy. However, the RSP Funds also intend to invest a portion oftheir assets in units of the Underlying Funds. This investment by the RSP Fundswill at all times be below the maximum foreign property limit prescribed forRegistered Plans by the Tax Act (the "Permitted Limit").

5. The investment objectives of the Underlying Funds are achieved throughinvestment primarily in foreign securities.

6. The direct investment by the RSP Funds in the Underlying Funds will be within thePermitted Limit (the "Permitted RSP Fund Investment"). Global Strategy and theRSP Funds will comply with the conditions of this Decision in respect of suchinvestments. The amount of the direct investment by each RSP Fund in thecorresponding Underlying Fund will be adjusted from time to time so that, exceptfor transitional cash, the aggregate of derivative exposure to, and direct investmentin, the Underlying Fund will equal 100% of the assets of the RSP Fund.

7. Except to the extent evidenced by this Decision and specific approvals granted bythe Canadian securities administrators pursuant to National Policy 39, theinvestments by the RSP Funds in the Underlying Funds have been structured tocomply with the investment restrictions of the Legislation and National Policy 39.

8. In the absence of this Decision, as soon as the aggregate holdings by an RSP Fundof securities of the corresponding Underlying Fund exceed 10% of the outstandingsecurities of the Underlying Fund, Global Strategy, and possibly the RSP Fund,would be required to comply with the reporting and other requirements of theLegislation.

9. In the absence of this Decision, pursuant to the Legislation, each of the RSP Fundsis prohibited from (a) knowingly making an investment in a person or company inwhich the mutual fund, alone or together with one or more related mutual funds, isa substantial security holder; and (b) knowingly holding an investment referred toin subsection (a) hereof. As a result, in the absence of this Decision an RSP Fundwould be required to divest itself of any investment referred to in subsection (a)herein.

10. In the absence of this Decision, the Legislation requires Global Strategy to file areport on every purchase or sale of securities of the Underlying Funds by the RSPFunds.

11. The investment in, or redemption of, securities of the Underlying Funds by the RSPFunds represents the business judgment of responsible persons uninfluenced byconsiderations other than the best interests of the RSP Funds.

AND WHEREAS pursuant to the System this MRRS Decision Document evidencesthe decision of each Decision Maker (collectively, the "Decision");

AND WHEREAS each of the Decision Makers is satisfied that the test contained inthe Legislation that provides the Decision Maker with the jurisdiction to make the Decisionhas been met;

The Decision of the Decision Makers pursuant to the Legislation is that theApplicable Legislation does not apply so as to prevent the RSP Funds from investing in,holding, or redeeming the securities of, its corresponding Underlying Fund.

PROVIDED THAT:

1. this Decision, as it relates to the jurisdiction of a Decision Maker, will terminate oneyear after the publication in final form of any legislation or rule of that DecisionMaker with respect to the matters in section 2.04(4)(b) of National Policy 39; and

2. the foregoing Decision shall only apply in respect of investments in, or transactionswith, the Underlying Funds that are made by the RSP Funds in compliance with thefollowing conditions:

(a) the RSP Funds and the Underlying Funds are under common managementand the Underlying Funds' securities are offered for sale in the jurisdictionof the Decision Maker pursuant to a simplified prospectus and annualinformation form which has been filed with and accepted by the DecisionMaker;

(b) each RSP Fund restricts its aggregate direct investment in its correspondingUnderlying Fund to a percentage of its assets that is within the PermittedLimit;

(c) the investment by the RSP Funds in the Underlying Funds is compatible withthe fundamental investment objectives of the RSP Funds;

(d) the simplified prospectus and annual information form of the RSP Funds willdescribe the intent of the RSP Funds to invest in specified UnderlyingFunds;

(e) an RSP Fund may change its Permitted RSP Fund Investments if it changesits fundamental investment objective in accordance with Legislation;

(f) no sales charges are payable by the RSP Funds in relation to theirpurchases of securities of the Underlying Funds;

(g) there are compatible dates for the calculation of the net asset values of theRSP Funds and the Underlying Funds for the purpose of the issue andredemption of the securities of such mutual funds;

(h) no redemption fees or other charges are charged by the Underlying Fundsin respect of the redemption by the RSP Funds of securities of theUnderlying Funds owned by the RSP Funds;

(i) the arrangements between or in respect of the RSP Funds and theUnderlying Funds are such as to avoid the duplication of management feesor incentive fees;

(j) no fees and charges of any sort are paid by an RSP Fund or by anUnderlying Fund or by the manager or principal distributor of an RSP Fundor an Underlying Fund or by any affiliate or associate of any of the foregoingentities to anyone in respect of an RSP Fund's purchase, holding orredemption of the securities of the Underlying Fund;

(k) in the event of the provision of any notice to securityholders of theUnderlying Funds, as required by the declarations of trust of the UnderlyingFunds or by the laws applicable to the Underlying Funds, such notice willalso be delivered to the securityholders of the RSP Funds; all voting rightsattached to the securities of the Underlying Funds that are owned by theRSP Funds will be passed through to the securityholders of the RSP Funds;in the event that a securityholders' meeting is called for an Underlying Fund,all of the disclosure and notice material prepared in connection with suchmeeting will be provided to the securityholders of the corresponding RSPFund and such securityholders will be entitled to direct a representative ofthe RSP Fund to vote that RSP Fund's holding in the Underlying Fund inaccordance with their direction; and the representative of the RSP Fund willnot be permitted to vote the RSP Fund's holdings in the Underlying Fundexcept to the extent the securityholders of the RSP Fund so direct;

(l) in addition to receiving the annual and, upon request, the semi-annualfinancial statements, of the RSP Funds, securityholders of the RSP Fundswill receive the annual and, upon request, the semi-annual financialstatements, of the Underlying Funds in either a combined report, containingboth the RSP Funds' and Underlying Funds' financial statements, or in aseparate report containing the Underlying Funds' financial statements; and

(m) to the extent that the RSP Funds and the Underlying Funds do not use acombined simplified prospectus and annual information form containingdisclosure about the RSP Funds and the Underlying Funds, copies of thesimplified prospectus, annual information form and financial statementsrelating to the Underlying Funds may be obtained upon request, by asecurityholder of the RSP Funds.

January 7th, 2000.

"J. A. Geller"      "Howard I. Wetston"